A recent landmark ECJ ruling saw a salesman successfully claim £27,000-worth of backdated holiday pay, spanning a period of 13 years, as he was ruled to have been unlawfully and incorrectly classified as a self-employed worker. As high-profile and ongoing cases are brought against industry giants such as Uber and Deliveroo (both of whom rely on a large contingent of self-employed workers) many business leaders now find themselves re-evaluating their use of this popular model, or facing similar back payment claims.
Such questions are nowhere more crucial than in the social care sector, where confusion around the definition of self-employment adds to an already burgeoning risk register. This is particularly so within the area of domiciliary care where some providers have a self-employed workforce.
A self-employed business model is in its nature at odds with the highly-regulated and compliance-led nature of the social care industry. Self-employment should only be used where the business focus is introducing workers to service users and where there are no other factors pointing towards employment. Business leaders that currently engage with self-employed workers must review their models to understand if they will stand up to legal scrutiny. Recent rulings tell us a worker’s status can’t be defined only by reference to the contractual clauses. If the reality of the relationship shows that when they are working they are working for the company that has engaged them, not the service user, a worker relationship will exist.
The genuinely self-employed should have control over their working activities, freedom to decide how and when their duties are carried out and ideally agree terms with the service users directly. This may by incompatible with the steps providers carry out to ensure practice standards are maintained by all staff, such as the carrying out of prescribed duties in a particular order or completion of a checklist provided by agencies. Such activities could lead to disputes over holiday pay and wider workers’ rights.
With this in mind, it would be prudent for care providers that currently rely on self-employed staff to consider alternatives. For example, could non-exclusive zero-hours contracts or annualised hours contracts be deployed as a more sustainable solution, or alternative working patterns created? Such solutions would still offer workers flexibility but safeguard providers against potential future holiday pay claims.
In addition to this volatility within the self-employment landscape, the care sector has another pressing issue regarding holiday backpayment, which could be further exacerbated by the ECJ’s ruling.
Historically many providers calculated holiday pay to reflect employees’ basic salary, not their normal take-home earnings. However, many care providers regularly demand additional sleep-in cover and overtime shifts. In 2015 Bear Scotland v Fulton made clear that holiday pay should include all normal pay and that this included obligatory overtime. In 2017 case law confirmed this obligation also applies to voluntary overtime, if deemed to be ‘regularly worked’.
These developments continue to present a significant challenge to care providers. Firstly, there is still some contention surrounding how to define whether voluntary overtime is ‘regularly worked’, with many providers still playing catch-up and subject to ongoing claims.
Furthermore, although the UK government provided some protection to affected businesses by limiting the holiday pay back payment period to two years, the most recent ECJ ruling saw a worker claim back 13 years’ worth of holiday pay entitlement. This would suggest that the playing field has been opened to employees to bring forward claims that date right back to 1996 and the introduction of the Working Time Directive. This challenges the lawfulness of the two-year cap on back pay claims and could affect both holiday pay claims and National Minimum Wage claims relating to sleep-ins.
The current employment climate is hugely volatile and presents a business-critical challenge to the care sector. With sleep-in shift back payment liability, self-employed worker status changes, and historic holiday pay claims looming, businesses must reduce future risk. For those experiencing financial uncertainty, revisiting employment and holiday pay models is an absolute must.
Matt Wort is a partner and health and social care specialist at Anthony Collins Solicitors
